ECB launches additional 750bn euro PEPP asset purchase programme

The European Central Bank launched a new emergency bond buying programme, vowing to do "as much as necessary and for as long as needed".

Policymakers also threw Greece a life-line, by waving the eligibility requirements for debt issued by the government in Athens.

And in a gesture towards Italy, the ECB reiterated that it would "not tolerate any risks to the smooth transmission" across the entire single currency area.

Dubbed the Pandemic Emergency Purchase Programme (PEPP), the new programme would purchase €750bn of bonds and commercial paper through the end of 2020 and the door was left open to an extension past that date if needed.

"The Governing Council will terminate net asset purchases under PEPP once it judges that the coronavirus Covid-19 crisis phase is over, but in any case not before the end of the year," the ECB said in a statement.

"To the extent that some self-imposed limits might hamper action that the ECB is required to take in order to fulfil its mandate, the Governing Council will consider revising them to the extent necessary to make its action proportionate to the risks that we face."

Very atypically for the ECB, the decision on the PEPP was taken and announced at an unscheduled emergency meeting on Wednesday night.

Another measure included in the package was the expansion of the lender's asset purchase programme to include so-called commercial paper issued by corporates, of sufficient quality, other than banks.

The ECB also eased standards on collateral.

America's Federal Reserve had recently announced the restart of its quantitative easing programme, announcing its intention to buy $500bn-worth of new US Treasuries and $200bn of mortgage backed securities and analysts at Barclays Research were expecting that it would soon increased those amounts to $1.0trn and $500bn, respectively.

Barclays attributed the need for increased Treasury purchases to financial markets increasingly pricing-in a drop in tax receipts, even as Congress prepares a fiscal stimulus plan.

"In that context, $500bn suddenly doesn’t sound as impressive," they said.

However, they voiced surprise that the MBS market had not reacted to what should have been a "hugely bullish" development for the agency MBS sector.